A blog dedicated to all things related to real estate law in Florida including foreclosure, construction, homeowners associations, closings, refinances, leasing and title

Monday, May 28, 2012

Should I Refinance

If you are lucky enough to have at least twenty percent real
equity in your home, then today’s record low setting mortgage interest rates
make considering a loan refinance a must for any person planning on staying in
their home for at least a few years. The
only question is whether it makes economic sense to refinance, and upon what
terms and conditions.

In order to
understand exactly whether it is worth refinancing must you start with the current
costs of your mortgage. Depending on your interest rate and your anticipated
time left in the subject home will allow a determination as to whether
refinance makes economic sense. In addition, in some cases a higher monthly
payment in a move to a shorter amortization could help you build substantial
equity in a much shorter time.

For example
homeowner with a $350,000 first mortgage with an interest rate of 5.25%
amortized over thirty years will pay $1,954.45 per month for the remaining term
of the mortgage. If that person currently owes $315,000 and is interested in a
thirty year fixed rate loan, today’s rates of 4.25% will reduce the monthly mortgage
payment to $1,549.61, or $404 per month.
Part of the savings is due to the lower principal balance, but most the
savings is due to the lower interest rate.

Interest
rates on a fifteen year fixed rate amortization loans are as low as 3.43%.
Using our same example, monthly principal and interest payments would increase
to $2,241.07, or about $286.00 per month. However, after five years of
payments, the fifteen year loan balance would only be $227,384.96, which is
approximately $60,000 less than the loan balance amortized over 30 years at the
4.25% rate. The higher monthly payment
will result in $41,000 in payments over 60 months but you will realize nearly
$20,000 greater reduction in the principal balance due to the lower interest
rate.

The average
American family moves every seven years. If you are confident that you will not
be in your home more than five years a special 5/1 adjustable-rate mortgage may
actually be the best course of action.
Interest rates on 5/1 arms are less than 3%, with a monthly payment over
thirty years equal to $1,314.50. That is
a savings of over $639.95 per month. At
the end of five years the amount owed will be approximately $279,010.71. However, if the additional $639.95 is paid
with the mortgage payment, the balance owed will only be $236,982.74.

The only
catch to any refinance the actual refinance cost. On a typical $315,000
mortgage refinance, the borrower will be looking at government taxes of
$1,732.50, title insurance premiums of approximately $2,500.00, appraisal costs
of $350, credit report, tax search and floods search fees of approximately
$250, Doc prep fees of about $500 and any points that the lender is charging
for the privilege of closing the loan.

With costs of
approximately $5,000, any refinance is not cheap. If the borrower is going to replace an
existing thirty year loan with a new thirty year loan it will take nearly fourteen
months of lower-cost loan payments to simply make up the cost of the refinance.
That is why it is crucial to determine how long you will stay in the home to
see if the cost of refinance is worth the lower interest rate. If the loan has
an additional point or two, it will take nearly eight months per point to make
up the difference.

Many
homeowners simply ignore the benefit of refinancing and continue to pay
mortgage payments on loans with interest rates over 5%. Some have rates as high
six or seven percent, and converting to a lower rate loan today would result in
even greater savings. Take the time to check your loan rate and determine
whether it makes financial sense for you to seek a loan refinance at this time.
There are many quality mortgage brokers who will assist you in reviewing your
savings at no cost to you so you can determine whether it makes financial sense
for you to refinance your home.

Michael Posner, Esq.,
is a partner in Ward Damon a mid-sized real estate and business oriented law
firm serving all of South Florida, with offices in Palm Beach County. They specialize in mortgage loans, and can
assist borrowers and banks in all loan matters.
They can be reached at 561.842.3000 or at www.warddamon.com

Many people prefer different properties to live and to invest money and there are many types of properties from them, residence property is in demand. For more info check this Homes for sale in Keystone Co .

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments.

The idea of refinancing has been incorporated in an excellent way in the article. Refinancing is a mortgage plan which offers you the chance to change your original mortgage loan with a new one so as to make it comparatively easy to repay the loan. One compelling reason to opt for refinancing is to take advantage of the low rate of interest prevailing in the market place. Here, one thing that is worth mentioning is that current mortgage rate prevailing in the market place is very low and the situation is ideal for refinancing. Refinancing also helps you change the term and type of a mortgage loan.To know more about refinancing, log on to http://www.mortgagefit.com/refinance.html

The thinking behind refinancing may be incorporated in a very good in the content. Refinancing is usually a mortgage plan that offers you the chance to change ones original mortgage with a brand new one in order to make this comparatively an easy task to repay the loan.

Thank you for sharing valuable information. Nice post. I enjoyed reading this post. The whole blog is very nice found some good stuff and good information here Thanks..Also visit my page. Private mortgage lenders in florida Federated Mortgage Services provides an array of financial solutions tailored to your lifestyle.

About Me

I am a Florida Board Certified Real Estate Attorney with 30+ years of residential and commercial real-estate experience.
I am an equity partner in Ward, Damon, Posner, Pheterson & Bleau, a mid-sized law firm serving all of South Florida, with three offices in Palm Beach County. Our firm specialize in and can assist in buying, borrowing and selling property throughout South Florida. I can be reached at 561.594-1452, mjposner@warddamon.com or www.warddamon.com